February 8, 2017

IRS Streamlined Foreign Offshore Amnesty Procedure for Non-US Citizens and Non-Green Card Holders

The IRS streamlined amnesty procedures for US citizens and green card holders have been well publicized, but less mentioned has been the IRS procedure for US residents who are not US citizens and who do not have green cards. This includes people who have met the IRS “substantial presence test” in the US but have not filed, or been qualified to file, the IRS Form 8840 Closer Connection Statement. Some examples could be individuals who moved to the US, or temporarily worked in the US, or remained in the US over 6 months in a calendar year without an appropriate visa, or even some “snowbirds”.

In each case, the individual may have accumulated substantial IRS penalties (knowingly or otherwise) for failure to report income from foreign financial assets (and perhaps also failure to file the appropriate IRS reporting form).

Fortunately, such individuals may qualify for a waiver of related penalties under a separate provision of the IRS Streamlined Foreign Offshore Procedures (SFOP). Unlike the SFOP eligibility test for US citizens and green card holders, which requires a particular year of presence outside the US for at least 330 days, the eligibility test for these US residents is much more lenient. They are eligible to enter the SFOP if they did not meet the “substantial presence test” in any one of the last 3 years for which the due date of their US tax return (including extensions) has expired. For example, if an individual moved to the US in September 2013, and is subject to penalties for 2014 and/or 2015, the individual may have penalties waived if he/she did not meet the “substantial presence test” for 2013.

If the taxpayer does not have any unreported income from foreign financial assets, but has failed to file FBARs (Form FinCEN 114) or other international reporting forms, he/she may be eligible to become compliant with those requirements, without penalty, under separate rules for delinquent FBARs, and delinquent international reporting forms. For guidance on some IRS amnesty procedures for US citizens and green card holders, please refer to our International Tax Alerts on our website dated February 24, 2015, and May, 22, 2015.

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